KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) believes Genting Bhd has legs for a turnaround driven by strong recovery in Resorts World Sentosa (RWS), Resorts World Genting (RWG) and Resorts World Las Vegas (RWLV) from tourist arrivals.
HLIB said Genting's earnings of RM669.9 million for financial year 2022 (FY22) were within its expectations at 104.2 per cent and above consensus at 118.8 per cent.
"Its earnings for the fourth quarter improved to RM438.2 million mainly due to improvement from Genting Singapore Plc (GenS), RWLV on higher convention travels and oil and gas (O&G), partially offset by decline in plantation and power segments," it said in a note.
HLIB said RWLV reported a record high quarter in terms of both revenue and adjusted pre-tax profit since operating from July 2021.
It recorded Q4 2022 revenue of RM1.03 billion and adjusted pre-tax profit of RM208.4 million.
"The improvement was mainly driven by strong convention travel, recovering local and foreign travels.
"Management remains optimistic that the segment will continue its improvement in FY23 driven by strong convention travels, new sporting events such as Formula 1 and NFL Pro Bowl in 2023 and better connectivity through Boring Company's underground transportation system," said HLIB.
The firm added that the current buoyant crude oil price should continue to benefit Genting's O&G segment.
In addition, coal prices have eased substantially which should lower the operating cost for the group's power assets.
"We raised our forecasts for FY23/FY24 by 24.8 per cent/17.3 per cent as we imputed forecast upgrade from GenS and RWLV," HLIB noted.
It maintained "Buy" on the stock with a higher target price of RM6.75.